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IRP, at the UW-Madison, is a center for interdisciplinary research into the causes and consequences of poverty and social inequality in the United States.
As one of three National Poverty Research Centers sponsored by the U.S.
Department of Health and Human Services, IRP has a particular interest in poverty and
family welfare in Wisconsin as well as the nation.

Official National Measure

The U.S. Census Bureau determines poverty status by comparing pre-tax cash income against a threshold that
is set at three times the cost of a minimum food diet in 1963, updated annually for inflation using the
Consumer Price Index, and adjusted for family size, composition, and age of householder. "Family" is defined
as persons living together who are related either by blood or marriage. Thresholds do not vary geographically.[1]
The Census Bureau has created an infographic to explain "How Census Measures Poverty."

The poverty threshold serves different purposes, including tracking poverty over time, comparing poverty
across different demographic groups, and as the starting point for determining eligibility for a range of
federal assistance programs. (For more on using the poverty thresholds, or their administrative counterpoint,
the poverty guidelines, for determining eligibility, see FAQ #1.)

In 2012, the most recent year for which data are available, the poverty threshold for a family of four was $23,492. The official national poverty rate was 15.0 percent. There were 46.5 million people in poverty.

When the official government poverty series began in 1959, poverty was at 22 percent. Unofficial estimates
by researchers before that time found a poverty rate in 1914 of 66 percent; 78 percent in 1932; 32 percent in 1947;
and 24 percent in 1958.[2] Figure 1 shows more recent poverty rates, in 1968, 1990, and 2012, using the official measure.
Especially notable trends are the consistent increase in child poverty, the dramatic decrease in elder poverty,
and the consistently high poverty rates among African Americans and persons of Hispanic heritage.

Researchers and policymakers have long criticized the official poverty measure for a number of reasons.
However, in spite of its shortcomings, detailed below, its salience in policymaking is noted by the
economists Bruce D. Meyer and James X. Sullivan: "Few economic indicators are more closely watched or
more important for policy than the official poverty rate. The poverty rate is often cited by policymakers,
researchers, and advocates who are evaluating social programs that account for more than half a trillion
dollars in government spending."[3]

Principal criticisms of the official poverty measure include:

Its "headcount" approach identifies only the share of people who fall
below the poverty threshold, but does not measure the depth of economic need;

It does not reflect modern expenses and resources, excluding significant draws on income
such as taxes, work expenses, and out-of-pocket medical expenses, and excluding resources
such as in-kind benefits (e.g., food assistance);

It does not vary by geographic differences in cost of living within the contiguous United States;

It is not adjusted for changes in the standard of living over time; and

Its strict definition of measurement units—"family"—as persons related by blood or marriage
does not reflect the nature of many households, including those made up of cohabitors,
unmarried partners with children from previous relationships, and foster children.

While the official measure remains the official national statistic, the Census Bureau has
been estimating poverty using a number of experimental measures as well, since the mid-1990s.
See Poverty: Experimental Measures on the Census Bureau's website for more about these approaches.
The most recent and prominent experimental measure, the Supplemental Poverty Measure—a work-in-progress
that will supplement but not replace the official measure—is discussed below, after discussion of
data sources for estimating poverty at the state and local levels.

State and Local Data on Poverty

For poverty estimates at the state and local levels, researchers recommend consulting the Census Bureau's
American Community Survey (ACS), the largest household survey in the United States, which is part of
the 2010 Decennial Census Program. In contrast to the decennial Census, the ACS is conducted annually,
although often data from two, three, or five years are averaged together to increase the precision of
estimates for smaller geographic areas.

The most recent ACS brief on poverty covers
2000 and 2012 and was issued in September 2013. The ACS surveys approximately 3 million addresses per year
through mail, telephone, and in-person interviews. It provides demographic, social, economic, and housing
data for the nation, states, congressional districts, counties, and other localities.

The Census Bureau describes the ACS as "an ongoing survey that provides data every year—giving communities
the current information they need to plan investments and services. Information from the survey generates
data that help determine how more than $400 billion in federal and state funds are distributed each year."

In addition to providing current small-area information about people's age, sex, family and relationships,
income and benefits, disabilities, and veteran status; and the poverty rate, which is an estimate of the
proportion of people with income below their poverty threshold; the ACS (and the CPS) also gauges the
depth of poverty.[4]

Depth of Poverty

Depth of poverty is expressed in an income-to-poverty ratio, which measures how close a family's or individual's income
is to their poverty threshold, measuring the depth of poverty for those below their threshold, and the
nearness to poverty for those above their threshold. (For current thresholds, see FAQ #1.)
Either the ACS or the CPS can be used to measure the depth of poverty;
in this discussion we refer first to ACS overall income-to-poverty ratios by
state (Table 1), and then to CPS national income-to-poverty ratios
by age, sex, race/ethnicity, and family status (Table 2).[5]

Families and individuals with an income-to-poverty ratio of less than 100 percent are identified as in poverty.
An income-to-poverty ratio of 100 to 124 percent indicates a family's or person's income is at or no more than
24 percent above their poverty threshold. An income-to-poverty ratio of 50 percent indicates a family or
person is living with income that is half of their poverty threshold; that is, they are living in deep poverty.

Table 1 below shows the percentage of people by specified income-to-poverty ratios for the
United States and by state in 2011. The table shows that among the states,
New Hampshire (12.0 percent) had the lowest proportion of people with income-to-poverty ratios of
less than 125 percent. The states with the lowest deep poverty rates—that is, the
lowest proportion of people living below 50 percent of their poverty thresholds—in 2011
were New Hampshire (4.4 percent), Wyoming (4.7 percent), Alaska (4.7 percent), New Jersey (4.8 percent),
and Vermont (4.9 percent). The states with the highest proportion of people with income-to-poverty ratios
of 50 percent were New Mexico (9.4 percent), Louisiana (9.4 percent), Mississippi (9.8 percent),
and the District of Columbia (10.3 percent). The national deep poverty rate was 7.1 percent; Wisconsin's was 5.8 percent.

Table 1.

Percentage of People by Income-to-Poverty Ratio in the Past 12 Months by State, 2011

State

Under 50.0 Percent

50.0 to 99.9 Percent

100.0 to 124.9 Percent

New Hampshire

4.4

4.4

3.2

Maryland

5.0

5.1

3.0

New Jersey

4.8

5.6

3.4

Alaska

4.7

5.7

4.1

Connecticut

5.0

5.9

3.2

Wyoming

4.7

6.6

3.6

Vermont

4.9

6.6

4.6

Virginia

5.3

6.2

3.9

Massachusetts

5.3

6.3

3.6

Delaware

5.8

6.1

4.1

Minnesota

5.2

6.7

3.8

Hawaii

6.1

6.0

3.4

North Dakota

5.8

6.5

3.6

Iowa

5.9

6.9

4.2

Wisconsin

5.8

7.3

4.5

Nebraska

5.6

7.5

4.7

Colorado

6.1

7.4

4.6

Utah

5.6

8.0

4.2

Pennsylvania

6.2

7.6

4.2

Kansas

5.7

8.1

4.5

Washington

6.2

7.7

4.3

South Dakota

5.9

8.0

4.8

Maine

5.2

8.9

5.2

Rhode Island

6.8

7.9

3.9

Montana

5.8

9.0

5.6

Illinois

6.9

8.1

4.7

Missouri

7.0

8.7

5.0

Nevada

7.2

8.7

5.0

UNITED STATES

7.1

8.8

4.9

New York

7.1

8.8

4.5

Indiana

7.9

8.1

4.7

Ohio

7.6

8.9

4.6

Idaho

7.1

9.3

5.3

California

7.2

9.4

5.4

Florida

7.5

9.5

5.6

Oklahoma

7.4

9.8

5.6

Oregon

7.7

9.8

5.0

Michigan

8.1

9.5

4.8

North Carolina

7.8

10.0

5.5

Tennessee

7.9

10.4

5.6

Texas

7.6

10.8

5.7

West Virginia

7.8

10.7

5.6

District of Columbia

10.3

8.4

3.2

South Carolina

8.5

10.4

5.8

Arizona

8.7

10.3

5.4

Alabama

7.8

11.2

5.9

Georgia

8.6

10.5

5.3

Kentucky

8.4

10.8

5.5

Arkansas

7.9

11.5

5.9

Louisiana

9.4

11.0

5.4

New Mexico

9.4

12.1

6.0

Mississippi

9.8

12.8

6.5

Source: U.S. Census Bureau, 2011 American Community Survey.
Note: Details may not sum to totals because of rounding.

Table 2 presents specified 2012 national income-to-poverty ratios by age,
sex, race/ethnicity, and family status using CPS data. It shows, for example,
that 6.6 percent of all people had income below one-half of their poverty threshold,
often called deep poverty. Approximately one in three people—34.2 percent—had income
under 200 percent of their threshold. Of children under age 18, nearly
10 percent—9.7 percent—had income below one-half of their poverty threshold;
and 43.8 percent of children lived in families with income below 200 percent of their poverty threshold.

Table 2.

People with Income Below Specified Ratios of Their Poverty Threshold by Selected Characteristics, 2012

Characteristic

Under 50 Percent

Under 100 Percent

Under 125 Percent

Under 150 Percent

Under 200 Percent

All people

6.6

15.0

19.7

24.6

34.2

Age

Under 18 years

9.7

21.8

27.5

33.3

43.8

18 to 64 years

6.2

13.7

17.9

22.1

30.7

65 years and older

2.7

9.1

14.6

20.9

33.7

Sex

Male

5.9

13.6

18.0

22.7

32.1

Female

7.2

16.3

21.4

26.5

36.3

Race and Hispanic Origin

White

5.4

12.7

17.2

21.9

31.4

White, not Hispanic

4.3

9.7

13.4

17.3

25.9

Black

12.7

27.2

33.6

39.6

50.5

Asian

5.7

11.7

15.1

19.2

27.6

Hispanic (any race)

10.1

25.6

33.4

41.4

54.6

Family Status

In families

5.4

13.1

17.4

22.0

31.2

Householder

4.9

11.8

15.7

19.9

28.7

Related children under 18

9.3

21.3

27.0

32.8

43.3

Related children under 6

11.6

24.4

30.3

36.0

46.7

In unrelated subfamilies

27.3

46.3

51.9

61.4

72.6

Unrelated individuals

11.2

22.4

28.9

35.4

47.0

Source: U.S. Census Bureau, Current Population Survey, 2013 Annual Social and Economic Supplement.

Supplemental Poverty Measure

The Census Bureau introduced the Supplemental Poverty Measure or SPM in 2010 to
provide an alternative view of poverty in the United States that better reflects
life in the 21st century, including contemporary social and economic realities and
government policy. As its name suggests, the SPM supplements but does not replace
the official poverty measure, which remains the nation's source for official poverty
statistics and for determining program eligibility.

The SPM was designed to address the official poverty measure's shortcomings, described above,
which were assessed by a National Academy of Sciences (NAS) poverty measurement panel convened in 1992
that made recommendations for improvement (see below). The SPM incorporates much of the NAS
methodology with modifications that were suggested by subsequent research.

In their research brief, "A Consumer's Guide to
Interpreting Various Poverty Measures," David S. Johnson
of the Census Bureau and Timothy M. Smeeding of IRP and the La Follette School of Public Affairs
at the University of Wisconsin–Madison note, "The Supplemental Poverty Measure combines the best
and most agreed upon elements of the research based on expert opinion and on the [Census Bureau's]
experimental series."[6]

In a side-by-side comparison of the official poverty measure and the SPM, Johnson and
Smeeding note their differences in measurement units, poverty threshold, threshold adjustments
(e.g., by family size), updating thresholds, and what counts as resources, pictured in the text box below.

All related individuals who live at same address, incl. any coresident
unrelated children who are cared for by the family (such as foster children)
and any cohabitors and their children

Poverty Threshold

Three times the cost of a minimum food diet in 1963

The 33rd percentile of expenditures on food, clothing, shelter, and
utilities (FCSU) of consumer units with exactly two children multiplied
by 1.2 to add 20% for all other necessary expenses

Threshold Adjustments

Vary by family size, composition, and age of householder

Vary by housing status: owners with mortgages, owners without mortgages, and renters.
Geographic adjustments for differences in housing costs (using ACS) and a three-parameter
equivalence scale for family size and composition

Source: David S. Johnson and Timothy M. Smeeding, 2012, "A Consumer's Guide to Interpreting Various U.S. Poverty Measures,"
Fast Focus No. 14-2012, based on K. Short, The Research Supplemental Poverty Measure: 2011,
Current Population Reports, P60-244, November 2012, U.S. Census Bureau.
Note: "Family" as defined by the Census Bureau is "a group of two people or more related by birth, marriage, or
adoption and residing together; all such people (including related subfamily members) are considered as
members of one family." http://www.census.gov/cps/about/cpsdef.html

A comparison of official and SPM poverty rates in 2012 for the total population and among
three age groups; under age 18, adults ages 18 to 64, and elders age 65 and older is shown in Figure 2.
Analysts attribute the differences in rates between the two measures among the populations to several factors,
including the higher thresholds set by the SPM.

For most groups, SPM poverty rates were higher than official poverty rates;
children are an exception with 18.0 percent poor using the SPM and 21.8 percent poor
using the official measure. The much higher poverty rates for people age 65 and older
partially reflect that the official thresholds are set lower for families with householders
in this age group, while the SPM thresholds do not vary by age.

History of Revising the Measure: NAS Recommendations

In 1992, the National Academy of Sciences study panel, the Panel on Poverty
and Family Assistance, was established at the request of Congress to conduct a
comprehensive examination of poverty measurement in the United States.
Their charge was to evaluate the official poverty measure to see if it was
still serving its intended purposes and whether the panel of experts thought it could be improved.

Among the panel members were two former IRP directors, Robert
Hauser (UW–Madison) and Sheldon Danziger (University of Michigan–Ann Arbor);
IRP affiliate and UW–Madison faculty, Franklin Wilson; and
an off-campus IRP affiliate, David Betson, University of Notre Dame.
In 1995,
the panel issued a final report and recommendations for change in the monograph
titled Measuring Poverty: A New Approach.

The study panel found the following:

Our major conclusion is that the current measure needs to be revised:
it no longer provides an accurate picture of the differences in the extent
of economic poverty among population groups or geographic areas of the
country, nor an accurate picture of trends over time. The current measure
has remained virtually unchanged over the past 30 years. Yet during that
time, there have been marked changes in the nation’s economy and society and in public policies that
have affected families’ economic well-being, which are not reflected
in the measure.

The panel recommended the following:

The official U.S. poverty thresholds should comprise a budget for the
three basic categories of food, clothing, shelter (including utilities),
and a small additional amount to allow for other needs (e.g., household
supplies). Actual expenditure data should be used to develop a threshold
for a reference family of four—two adults and two children. Each
year, that threshold should be updated to reflect changes in spending
on food, clothing, and shelter over the previous 3 years and then adjusted
for different family types and geographic areas of the country. The resources
of a family or individual that are compared with the appropriate threshold
to determine poverty status should be consistently defined to include
money and near-money disposable income: that is, resources should include
most in-kind benefits and exclude taxes and certain other nondiscretionary
expenses (e.g., work expenses).

The procedure for updating the poverty thresholds over time is an integral
part of the proposed measure…. We propose a regular updating procedure
to maintain the time series of poverty statistics. We also recommend a
conservative updating procedure that adjusts the thresholds for changes
in consumption that are relevant to a poverty budget, rather than for
changes in total consumption.[7]

History of Revising the Measure: CNSTAT Review

In 2004, the Committee on National Statistics hosted a workshop to review federal
research on alternative methods for measuring poverty using an income poverty
measure. The workshop was requested by the U.S. Office of Management and Budget
to assess progress in moving towards a new measure of income poverty as recommended
by the 1992 NAS Panel on Poverty and Family Assistance.

The workshop provided a forum for comment on methods developed for key components
of the CNSTAT Panel’s proposals and the degree of support for such methods.
The roster was as follows (2008 affiliations are listed): Timothy Smeeding (co-chair),
IRP Director and Arts and Sciences Distinguished Professor of Public Affairs
and Economics, University of Wisconsin-Madison, and Director Emeritus of the
Luxembourg Income Study; Barbara Wolfe, Professor of Economics,
Population Health Sciences, and Public Affairs, and former Director of both
IRP and the La Follette School of Public Affairs, UW–Madison; Rebecca
Blank (co-chair), Under Secretary for Economic Affairs, U.S. Department
of Commerce; David Betson, Associate Professor of Economics
and the former Director of the Hesburgh Program in Public Service at the University
of Notre Dame; and Graham Kalton, Chairman of the Board of
Westat, Incorporated, an employee-owned research corporation.

Wisconsin Poverty Measure

Discussion of the official poverty measure's shortcomings and ways to improve it led to the realization that states and localities would benefit from having a better gauge of their own area's economic disadvantage. Among those taking the lead in the development of more accurate and timely state and local measures were IRP researchers and programming staff. They have devised a poverty measure that provides a more timely and accurate accounting of poverty throughout the state of Wisconsin. They share their annual findings in the Wisconsin Poverty Report.

The Wisconsin Poverty Measure (WPM) is designed to tell not only which people and families are poor, but also to gauge the influence of public policies on poverty. The WPM is suitable for estimating the costs and antipoverty effects of legislation that expands noncash benefits or provides tax credits to low-income citizens. It can also tell state policymakers how much additional poverty occurs from program cutbacks or tax increases.

The WPM is the first state-level poverty measure effort of its kind in the nation and has been developed to serve as a model for other states and localities seeking to develop their own more meaningful measure to assess poverty and policies in ways that reflect the characteristics and policy interests of their own state.

The most recent Wisconsin Poverty Report presents findings for 2012, providing a detailed analysis of the state's economy, job gains and losses, public assistance program participation, and other economic benchmarks. It also presents state poverty rates using several different measures in addition to the WPM.

The report's key finding is that jobs, earnings, and wages in Wisconsin are beginning to rise again, lessening the impact of safety net programs (e.g., food assistance) on poverty because benefits are lower due to higher earnings.

Comparing WPM with Official and Market-Income Measures

Figure 3 presents some of the report results, comparing the WPM state poverty rates overall and for children and the elderly with official rates and those using a market-income-only measure.[8] Most striking is the difference in the child poverty rate between the official and market-income measures and the WPM. The primary reason that the WPM child poverty rate (11.0 percent) is so much lower than the official (17.9 percent) and market-income (23.6 percent) child poverty rates is that the WPM takes into account the many non-cash benefits and tax credits for which families with children are eligible. The non-cash benefits counted by the WPM include SNAP food assistance, which families with children take up at much higher rates than other demographic groups.

Under the market-income measure, which counts only private income and ignores government benefits and taxes, about one-fourth (24.4 percent) of the state population as a whole is poor, with more than half (50.8 percent) of the elderly and 23.6 percent of children living in families considered poor. Using the official measure, which includes cash benefits such as Social Security, elderly poverty drops dramatically, to 6.2 percent. Child poverty under the official measure is also lower than the market-income measure, but is higher than other age-group poverty rates at 17.9 percent, mostly because few cash assistance benefits are provided to otherwise-poor families with children.

Using the WPM to Assess Safety Net's Effectiveness

In addition to comparing poverty rates using different measures, IRP researchers also examined the impact on Wisconsin statewide and regional poverty rates of the major public-benefit programs (e.g., housing programs) and of work and medical expenses, which are counted in the WPM but excluded from the official poverty measure. The analysis covers data over a four-year period, from 2008 through 2012.

Figure 4 illustrates the effects of taxes (e.g., Earned Income Tax Credit or EITC), public benefits (e.g., SNAP food assistance), and expenses (e.g., child care) on overall poverty in Wisconsin from 2008 through 2012. Among the benefit programs examined, SNAP had the greatest impact on reducing overall poverty in 2012, with the food assistance program reducing the percentage of people in poverty by 1.9 percentage points, a bit below the 2.2 percentage point reduction in 2011. As market incomes increase, SNAP benefits are reduced and some participants no longer qualify for benefits. Therefore, researchers note, in times of economic recovery a reduction in the influence of SNAP on poverty rates is to be expected. The second largest antipoverty effect was from work-related refundable tax credits such as the EITC.

Wisconsin Poverty Rates by County or Multicounty Areas

The Wisconsin Poverty Report findings on poverty across regions within the state represent a significant strength of the WPM. Researchers' analysis of sub-state areas reveals that the statewide poverty rate hides substantial variation in poverty across Wisconsin regions. For example, estimates for poverty rates using the WPM for these sub-state areas range from 18.8 percent in Milwaukee County to 4.5 percent in Waukesha County. As shown in Figure 5, the only places with poverty rates that were significantly higher than the state average of 10.2 percent were Milwaukee County (18.8 percent), Dane County (12.5 percent), and the sparsely populated Northwest/Superior region (14.6 percent).

Poverty estimates for some regions within Wisconsin's largest counties can also be examined by exploiting the relatively large sample sizes for ACS data. Poverty rates compared across sub-county regions may show variations that are more dramatic within counties than across the state's 28 areas defined by the Census Bureau. As depicted in Figure 6, Milwaukee County provides an example of this variation. Overall poverty rates ranged from 8.6 percent in one southwestern sub-county area to 41.6 percent in the central part of the City of Milwaukee. The differences in child poverty in Milwaukee County (not shown) were even larger, ranging from 2.3 percent in the northwestern part of the county to over 53.2 percent in central city Milwaukee.

An examination of overall poverty rates within Dane County reveal similar variations to those of Milwaukee County, as shown in Figure 7. In the City of Madison, the poverty rate was 29.7 percent in 2012. To the west, outside of Madison, the poverty rate was 11.5 percent. To the east, outside of Madison, the poverty rate was 4.0 percent. The Dane County overall poverty rate was 12.5 percent.

[1] The Census Bureau cautions that the thresholds should be interpreted as a
"statistical yardstick" rather than as a complete accounting of how much income people need to live.
They were intended to define and quantify poverty in America and to record changes in the number of persons
and families in poverty and their characteristics over time.
See FAQ #1, What are poverty thresholds and poverty guidelines?,
for a more detailed discussion of this topic.

[2] R. D. Plotnick, E. Smolensky, E. Evenhouse, and S. Reilly,
"The Twentieth-Century Record of Inequality and Poverty in the United States,"
in The Cambridge Economic History of the United States, Vol. 3, eds. S. L. Engerman
and R. E. Gallman (Cambridge: Cambridge University Press, 2000),
249-299; G. Fisher, "Estimates of the Poverty Population under the
Current Official Definition for Years before 1959," mimeograph,
Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services, 1986.

[4] The ACS uses a different method to determine a family's or individual's
poverty threshold than that used for the CPS ASEC. Poverty thresholds are determined by multiplying
the base year poverty threshold (1982) by the average of monthly Consumer Price Index values
for the 12 months preceding the survey month (since the ACS is a continuous survey).
For information, see "How Poverty Is Calculated in the ACS" at http://www.census.gov/hhes/www/poverty/poverty-cal-in-acs.pdf.

[5] Note that the national poverty estimates from the ACS may differ
somewhat from the official poverty rate based on the CPS data, because of methodological
differences in the two surveys (e.g., sampling frame, amount of detail asked about income, and time period covered).